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China CPI Comes At 4.9%, Below Consensus Of 5.4%, In Line With Zero Hedge "Pervasive Data Manipulation" Expectations

Tyler Durden's picture


The consensus expectation for Chinese CPI was 5.4%. Zero Hedge's expectation based on just announced manipulated CPI data was 4.9%. Guess who was correct... In the meantime, Chinese food prices are not increasing by 5% every ten days, or over 400% annualized. Or at least, they are not doing so on rice (most likely fake) paper.

From Bloomberg:

China’s inflation was less than economists estimated in January after the statistics bureau cut the weighting of food in the consumer-price index.

Consumer prices rose 4.9 percent last month from a year earlier, the statistics bureau said in a statement on its website today. That compared with a 4.6 percent gain in December and the median forecast of 5.4 percent in a Bloomberg News survey of 27 economists. Producer-price inflation accelerated to 6.6 percent from 5.9 percent in December.

A drought in wheat-growing regions, rising global commodity prices and a 53 percent increase in money supply in two years are adding to price pressures in the fastest-growing major economy. Officials may front load policy tightening in the first half of the year as inflation remains elevated, according to economists from JPMorgan Chase & Co. and Morgan Stanley.

“The combination of rising inflationary pressure and robust economic growth makes further tightening inevitable,” Shen Jianguang, a Hong Kong-based economist at Mizuho Securities Asia Ltd., said before today’s release. He expects at least two more interest-rate increases before the end of June.

The Shanghai Composite Index rose 0.4 percent as of 10:15 a.m. local time
Changes to Index

Statistics bureau spokesman Sheng Laiyun said in October that new weightings for the consumer price index would take effect in January. Food previously accounted for a third of the basket of goods that make up the index and was the main driver of inflation last year. Deutsche Bank AG economist Ma Jun said yesterday any slowdown in consumer-price gains may only reflect a reweighting.

January’s inflation data reflects a “more thorough” change in the weightings of the index made every five years, the China Securities Journal reported today, citing an unidentified statists bureau official.

Asian economies, with food costs and inflows of capital driving inflation, may need to raise interest rates further to limit the risk of overheating and prevent a “hard landing,” International Monetary Fund Managing Director Dominique Strauss- Kahn said Feb. 1. India’s benchmark wholesale-price index rose 8.23 percent in January, Indonesia’s inflation is 7 percent and South Korea’s is 4.1 percent according to the latest government data.


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Mon, 02/14/2011 - 22:12 | 962244 Mr Lennon Hendrix
Mr Lennon Hendrix's picture


The Graduate "One Word: Plastics":

Tue, 02/15/2011 - 00:05 | 962564 william the bastard
william the bastard's picture


Tue, 02/15/2011 - 00:16 | 962582 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

It is ironic that plastic rice is cheaper than real rice when peak oil production is looming.  Instead of burning Picassos for heat, we eat them.

You would rather a club quote perhaps....

Tyler checks his watch....

It's getting exciting now.

Tue, 02/15/2011 - 00:25 | 962595 william the bastard
william the bastard's picture

Bottled water has cost more than gasoline for over 10 years now.

"Is that your blood?"


Mon, 02/14/2011 - 22:15 | 962255 Cleanclog
Cleanclog's picture

No inflation!  Back up the truck and buy them up. And here is the heralded sputnik moment - - - moon shot!!!!

Mon, 02/14/2011 - 22:16 | 962260 Yen Cross
Yen Cross's picture

 Nice call on that one. And the teflon Aussie is on the bid anyways. Even after a fairly dovish RBA statement.

Mon, 02/14/2011 - 22:26 | 962301 Mike2756
Mon, 02/14/2011 - 22:30 | 962317 Notimpossible
Notimpossible's picture

PPI blowing past expectations, 6.6% vs. 6.1%. Nice spread on the PPI/CPI...should keep the veil over the masses...number one rule of plutocracy (ahem Egypt!) keep the masses sedated

Mon, 02/14/2011 - 23:51 | 962517 Hedge Jobs
Hedge Jobs's picture

Yeah PPI a shocker at 6.6 (5.9 prior). Not good news for chinesse companies. Im sure Hu is on the phone to the chairsatan right now asking for advice on how to strip out commodity prices from the PPI.



Mon, 02/14/2011 - 22:31 | 962320 Maiden Lane
Maiden Lane's picture

Well, I for one am glad everything is alright!

Mon, 02/14/2011 - 22:32 | 962327 alien-IQ
alien-IQ's picture

Remember when CNBC used to provide the kind of relevant data and insight ZH does?.....

.....Neither do I.

Mon, 02/14/2011 - 23:05 | 962407 william the bastard
william the bastard's picture

Where o where is Ted Davis this valentines night?

Tue, 02/15/2011 - 00:05 | 962566 NOTW777
NOTW777's picture

they report the china # as straight

Tue, 02/15/2011 - 01:21 | 962670 whatsinaname
whatsinaname's picture

And now Brent and WTI ramp up on such good news.

That oughta be good news for FDX.

Mon, 02/14/2011 - 22:33 | 962328 Boilermaker
Boilermaker's picture

I'm in Beijing on Friday, Nanjing on Saturday, and Wuxi on Monday.

I'll report back the price of deep-fried sewer rat when I get back!

Mon, 02/14/2011 - 22:34 | 962333 Maiden Lane
Maiden Lane's picture

Mubarak in a coma!!! that was fast

Mon, 02/14/2011 - 22:51 | 962370 sabra1
sabra1's picture

no, he was placed in suspended animation, so that the next generation of egyptians, would re-elect him as pharoah once again!

Mon, 02/14/2011 - 22:37 | 962335 eigenvalue
eigenvalue's picture

Go long agricultural products, especially wheat, corn and soya bean. I pray every night that the current drought in China would devastate all the winter wheat crop! Screw the Chinese!

Mon, 02/14/2011 - 23:27 | 962475 tmosley
tmosley's picture

Be careful what you wish for.  Suffering is a contagion that crosses oceans overnight.

Mon, 02/14/2011 - 23:56 | 962531 william the bastard
william the bastard's picture

Quintus Horatius? Oh!..not

.. it's tmoselry know it all. He must be quoting Jefferson Davis "Boss" Hogg. West Okey shack dwelling  unpaid gold pimp doomer

Mon, 02/14/2011 - 23:46 | 962507 Terminus C
Terminus C's picture

Fuck man... you wish mass starvation on a people because... why exactly?  If you have issue with the government of China, they will not be affected by the loss of food.

A) you are a heartless piece of shit


B) you are a dumb fucking kid who knows not what you are wishing for.

Tue, 02/15/2011 - 00:02 | 962553 eigenvalue
eigenvalue's picture

Only a famine will wake the Chinese up and get rid of the current regime. Almost every countrywide uprising in the Chinese history started with a big famine. 

Tue, 02/15/2011 - 00:49 | 962629 Terminus C
Terminus C's picture

And what, exactly, do you think will replace the current regime?  The death of millions will bring about a harsher, more controlling, more sociopathic government.  That is the history of China.


Tue, 02/15/2011 - 06:43 | 962899 fajensen
fajensen's picture


C) the fallout will destroy the oligharchs here ...

Mon, 02/14/2011 - 22:39 | 962343 chump666
chump666's picture

and PPI came in strong China is trying that Goldilocks crap the US tried to pull in 2007, before the economy imploded.

everyone in the universe knows china manipulates every data that comes out

China is c-hair away from hyperinflation.

You wanna make a bet zero hedge, bet China tightens like mad coming quarter, and sells a shit load of UST's and Shanighai short's on.  A better bet, will send the global economy into a ice-age, say 6mths long.  Till maniacal Bernanke buys another 600billion.

As for the AUD, blame the lazy banks sitting on long carry trade plays, rejoice when they get crunched on a HFT short sell

Mon, 02/14/2011 - 22:38 | 962347 system failure
system failure's picture

It matters not what they report any more or any government for that concern....

What matters is whether I can afford what I need to survive.

Life of luxury items will not exist, as the need to exist with even less becomes life.


Mon, 02/14/2011 - 23:59 | 962543 william the bastard
william the bastard's picture

Sticking feathers up your butt does not make you a chicken.


Tyler Durden

Tue, 02/15/2011 - 08:56 | 962992 tmosley
tmosley's picture

And yet you keep trying.

Mon, 02/14/2011 - 22:39 | 962348 SHRAGS
SHRAGS's picture

Thursday, 15 March 2007, 10:24

EO 12958 DECL: 03/15/2032
Classified By: Ambassador Clark T. Randt, Jr. Reasons 1.4 (b) and (d).

4. (C) GDP figures are "man-made" and therefore unreliable, Li said. When evaluating Liaoning's economy, he focuses on three figures: 1) electricity consumption, which was up 10 percent in Liaoning last year; 2) volume of rail cargo, which is fairly accurate because fees are charged for each unit of weight; and 3) amount of loans disbursed, which also tends to be accurate given the interest fees charged. By looking at these three figures, Li said he can measure with relative accuracy the speed of economic growth. All other figures, especially GDP statistics, are "for reference only," he said smiling.


Mon, 02/14/2011 - 22:41 | 962354 London Banker
London Banker's picture

Well done on the forecast, Tyler!  Impressive.

Good Michael Pettis piece on the Japanification of the Chinese economy, where holding down wages and subsidies to investment lead to long term deflationary disaster.



Mon, 02/14/2011 - 22:59 | 962392 meizu
meizu's picture

why does everyone compare china to Japan?  Just bcause they are both east asian doesn't mean their economies will follow the same path.  The country that should be compared to Japan is United States, which is about to experience deflationary disaster.

Mon, 02/14/2011 - 23:01 | 962398 Boilermaker
Boilermaker's picture

It's all Oriental isn't it?  What's the difference?  Rugs, rice, noodles...shit, man, I can't even tell the difference.

Mon, 02/14/2011 - 23:43 | 962504 dcb
dcb's picture


they will not let america go into deflation. period.

haven't ypu learned anything. any hint of prices falling will be met by anther qe. everytime asset prices fall they used to have a rate cut, since they can't now it means another qe.

Mon, 02/14/2011 - 22:49 | 962369 chump666
chump666's picture

..they cut food weighted!?? 

As if the market is gonna buy that BS!  I'll bet the 5yr CDS is blowing out for China.

Big tightening ahead, send a ton of inflation back to the US.

Mon, 02/14/2011 - 22:51 | 962372 tickhound
tickhound's picture

I don't eat chinese food

Mon, 02/14/2011 - 22:53 | 962376 Notimpossible
Notimpossible's picture

February 15, 2011

Stocks hit three year high on bigger than expected US fiscal deficit and Chinese inflation only coming in at 5%

New York - The S&P 500 got a lift from expectations that FedEx lowered forecast due to weather will accelerate second quarter earnings as spending and business resumes postponement. Copper hit and all time new high as Chinese demand should accelerate on better than expected inflation data. Joe Smith from Deutsche Bank says "lower than expected Chinese inflation should open the door to more dovish comments from the PBoC"...


Mon, 02/14/2011 - 22:57 | 962380 Boilermaker
Boilermaker's picture

Fuckin' A Right!

Mon, 02/14/2011 - 23:03 | 962401 Notimpossible
Notimpossible's picture

Consumer stocks were the best performing sub-index in the S&P 500 Index, as credit card companies announced that they were increasing credit limits by two fold to keep up with the economic momentum. Billy Watson from LA was quoted as saying "great news on the credit limit, I almost had live within my means and sell my ipad"

Mon, 02/14/2011 - 23:01 | 962395 billwilson
billwilson's picture

MUST keep CPI number UNDER 5%!


Mission Accomplished.

Mon, 02/14/2011 - 23:04 | 962404 Boilermaker
Boilermaker's picture


I wonder if they'll catch on?

Mon, 02/14/2011 - 23:01 | 962396 jobs1234
jobs1234's picture

Does this mean I should BTFD?

Mon, 02/14/2011 - 23:03 | 962403 Misean
Misean's picture

Well that's a relief. I'll just pop on down to the corner rice vendor and show them the headline. Be eating good tonight!

Mon, 02/14/2011 - 23:18 | 962414 mynhair
mynhair's picture

Eat better tomorrow, play AVL.

Top 8.33 (in pre-market 2 weeks ago), bottom 7.02 (set last week).

8.10 to 7.51 today range.  BooYah, you Cramer ass!

It's new, has no charts, BTW.

Mon, 02/14/2011 - 23:06 | 962408 mynhair
mynhair's picture

Kewl, rally on!

(Excuse me while I puke -again.)

Mon, 02/14/2011 - 23:12 | 962420 buzzsaw99
buzzsaw99's picture

Confucius say:

Statistician who lie like dog wake up with fleas.

Statistician who fart in church sit in pew.

Statistician who shave inflation lose face.

Mon, 02/14/2011 - 23:15 | 962424 mynhair
mynhair's picture

That was Cornfucious that said that, not to be technical....

Mon, 02/14/2011 - 23:37 | 962446 buzzsaw99
buzzsaw99's picture

buzzsaw99 say: mynhair who squawk like dodo wind up with egg on face.

cornholio say: i need tp for my bunghole.

Mon, 02/14/2011 - 23:34 | 962488 Scritchy
Scritchy's picture

Buzz, I for one really like those sayings and got a kick out of them.

But then again, I really like to fart in a space suit.  :)


Mon, 02/14/2011 - 23:50 | 962501 buzzsaw99
buzzsaw99's picture

Scritchy who cut cheese in suit make own eyes water.

Scritchy who cut cheese with mynhair in suit make nacho cat.

Mon, 02/14/2011 - 23:51 | 962518 Bruno the Bear
Bruno the Bear's picture

The snow boss, where was the snow!

Mon, 02/14/2011 - 23:59 | 962521 SheepDog-One
SheepDog-One's picture

The old 'hi expectations, miraculous relief lower number = magical great news rally' in an implosion.

Although Asia markets arent doing much, maybe its reached maximum fakeness saturation and the only thing that effects markets is the machines.

Tue, 02/15/2011 - 09:27 | 963056 TBT or not TBT
TBT or not TBT's picture

it's skynet

Mon, 02/14/2011 - 23:53 | 962522 PulauHantu29
PulauHantu29's picture

I watched an interview with some small rural farmers on TV who complained about red/green peppers soaring 300%.

"Yes, we have no inflation, we have no inflation today."

Mon, 02/14/2011 - 23:57 | 962534 Barleycorn
Barleycorn's picture

Outside of the obvious manipulation of the CPI food component to present a prettier picture, there is a far more insidious change to the CPI weighting that no one seems to be commenting on.  The increase in weighting of the property component of CPI, calculated using a formula along the lines of owner's equivalent rent, is going to flatter the CPI becase of the extremely low rental yields in China.  I say this is insidious because, at least based on the notes I am reading, the market believes that the increase in the weighting of the property component actually counteracted some of the impact of the reduction in the food component weighting.  It in fact lowered the CPI headline reading further.  

Tue, 02/15/2011 - 00:57 | 962635 chump666
chump666's picture

I'll bet China will attempt a surgical strike on their property market...

Tue, 02/15/2011 - 00:01 | 962551 g3h
g3h's picture

Food rose 10.3%, non-food 2.6%.

Tue, 02/15/2011 - 00:04 | 962557 Sutton
Sutton's picture

"Ahh,the Infamous Craw"

"Not Craw. CRAW!"

Tue, 02/15/2011 - 01:31 | 962693 trav7777
trav7777's picture

just strip out anything that's going up...problem solved

Tue, 02/15/2011 - 01:31 | 962695 glenlloyd
glenlloyd's picture

really...all of the blatant lying, it's absofuckinglutely ridiculous.

Tue, 02/15/2011 - 01:44 | 962716 Wolf in the Wilds
Tue, 02/15/2011 - 01:46 | 962718 OldPhart
OldPhart's picture

A little off-topic, but I had to share this article.

South Carolina May Adopt Own Currency

Tue, 02/15/2011 - 02:04 | 962737 Temporalist
Temporalist's picture
Heavy metals tainting China’s rice bowls Cadmium, other toxins poison large amounts of Chinese staple

"As much as 10% of China’s rice may be tainted by poisonous cadmium, a heavy metal discharged in mine and industrial sewage that makes its way into rice paddies, according to agricultural researchers at a major university."

Tue, 02/15/2011 - 02:18 | 962755 UninterestedObserver
UninterestedObserver's picture

Are any govt statistics real anywhere in the world?


"Under the revised weightings, the food component declined by 2.21 percentage points and clothing, medical costs and telecommunications were also reduced, the National Bureau of Statistics said today, without giving the new weightings."

Tue, 02/15/2011 - 02:57 | 962793 nevket240
nevket240's picture

Have been in Zhuhai for nearly 3 weeks for New Year.

Portions of sewer rat are smaller this year, inflation hiding. Most prices here are up and away. Friends in bar industry will attest to that.

I will make a point on China GDP. Everywhere I travel here there are massive great shopping areas being developed and then stocked. BUT. The stock is not moving, dudes. This is where they are creating GDP. The amount of new stock sitting, unloved and unwanted, on shelves is ferkin amazing. The GF is in the retail trade, very quiet, even over New Year. And this is in one of the wealthier places in China, Zhuhai.

cheers from a ferkin chilly China. 

Tue, 02/15/2011 - 07:10 | 962908 Dollar Bill Hiccup
Dollar Bill Hiccup's picture

Happy happy joy joy. Kumbaya. Etc.

If Langley wasn't behind the Egyptian coup, my name ain't DBH.

I hope Li Ho Fooks knows what he is doing in China ... Hi ho. 

Tue, 02/15/2011 - 07:43 | 962913 mack jim
mack jim's picture

Tungsten raw material prices lead to rise, which for some tungsten manufacturers have put great pressure. But some companies do not have much impact by, for example:Tungsten

Tue, 02/15/2011 - 10:53 | 963350 topshelfstuff
topshelfstuff's picture

First of all, this wasn't a quick "Change the Formula/Calculation" shenanigan. This was expected, and due, being the 12th 5-year CPI adjustment. This is a mandate, and the Fact is that Food, though the Cost has Increased, it no longer requires 34% of the Income of The People. I'm sure you all know that Net/Net the Food component in China has also changed in respect to the average diet. The Chinese People, similar to other Emerging Market countries, have enjoyed a large upgrade in what they eat --- a higher grade diet, foods that wouldn't have been possible for them to consider, about 10 years ago. This upgrade has been going on for quite a while and continues ---the opposite of the West.

The New Formula increased Housing Costs, and the Bottom Line, unlike the Picture Painted, resulted in a Higher Number being reported, not a Lower CPI.

Before I add a paste of some notes I just picked up, isn't it noteworthy just for the simple fact that this wasn't a "hidden", and unscheduled change, with an obvious goal. Yes I'm talking about how our Yardstick has changed so many times. Also, there is a Pie-Chart available that shows the percentages as they were, and what the new formula is. Plus, its a Fact...the Food slice of the Pie is NOT 34% of Income any longer, and Housing/Rentals have Increased more, and that was added in. Excuse the long paste:


"The money supply and lending data suggest that government efforts to clamp down on liquidity might be taking hold, though broad-based inflation provides no leeway for the central bank to relax its tightening stance," said Connie Tse, economist at Forecast PTE in Singapore.

Analysts in a Reuters poll had forecast January's inflation at 5.3 percent, up from 4.6 percent in December. Contrary to expectations, a change in how the consumer price index is calculated added to the reading, rather than subtracted from it.


In one sign of the accumulating pressures, core inflation, stripped of volatile food prices, jumped to 2.6 percent year on year, the highest in at least a decade, from 2.1 percent a month earlier.



The National Bureau of Statistics said its adjustment in the way it calculates consumer price inflation better reflected the evolution in Chinese consumption patterns.

"February CPI is expected to be about 5.2 percent, and if it is significantly lower than that, we may conclude that inflation in China has changed fundamentally," said Gao Shanwen, chief economist with Essence Securities in Beijing. "Or we can say that the CPI indicator itself is quite doubtful in terms of reliability."


Housing was given a much larger share of the new CPI basket, while the weighting of food prices was reduced.

These changes were consistent with an economy that is fast becoming more prosperous, allowing urbanites to spend a smaller portion of their incomes on basic needs and more on big-ticket items.


Many in the market had expected that the adjustment, conducted every five years, would lower the CPI, but the statistics agency said the adjustment had actually added 0.024 percentage point to January's reading.


At least some investors and analysts took the statistics agency at its word, and said that lower inflationary pressure would reduce the need for a big dose of interest rate increases. China's main stock index was steady after soaring 2.5 percent on Monday.

Ting Lu, an economist with Bank of America-Merrill Lynch, noted that the biggest surprise was the 10.6 percent increase in food prices year on year.

Many had thought a larger rise was in store, because the Chinese New Year fell earlier in 2011 than 2010 and that was expected to push up food costs in January.

"The implication here is that inflation pressure might be smaller than the market had thought," he said.

[[[ Plus, as I mentioned in a post yesterday, no where is it mentioned about the Wage Increases in the 15%-20% range, well ahead of the Inflation Rate, and a renewed promise to Always adjust Wages MORE than the Inflation Rate --- I'm not surprised. I wouldn't expect our News agencies to be reporting about the continual Higher Standard of Living in China, Asia, South/Latin America, etc...the countries I call EastBloc or BRICets...and the year after year Pay/Wage Increases of above 10% ]

Tue, 02/15/2011 - 12:37 | 963625 cougar_w
cougar_w's picture

Someone needs to create a Pervasive Data Manipulation Index. I'd trade it.

Tue, 02/15/2011 - 20:55 | 965456 co2010
co2010's picture

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